The Power Gap – How China Outpowered the U.S.

Chart of the Week #58

Last month, I showed you a chart based on Ray Dalio's methodology comparing U.S. and Chinese power across eight key metrics. The data revealed that while America still leads in finance and military strength, China is rapidly catching up in the areas that matter most for the future—trade relationships, industrial competitiveness, and innovation.

But in this week's Chart of the Week, I want to show you something even more striking: a single metric that captures the fundamental shift in global industrial power better than any other. Take a look at this graph of electricity generation in the U.S. and China from 2000 to 2024.

What you're seeing here is nothing short of an economic revolution. China has skyrocketed from around 1,000 terawatt hours (TWh) in 2000 to over 10,000 TWh today. That’s a 10x increase in just over two decades. Meanwhile, U.S. electricity generation has remained essentially flat around 4,000 TWh. China surpassed the U.S. around 2010 and hasn’t looked back—today, it generates roughly 2.5 times more electricity than we do.

As Elon Musk put it last year when he saw this chart:

He’s right. Electricity generation is one of the best real-time indicators of industrial strength. When you can produce 2.5x more power than your rival, you can run 2.5x more factories, smelters, fabs, data centers—and everything else that makes a modern industrial economy tick.

That power gap helps explain why manufacturing has steadily migrated to China. Consequently, it also shows up in the vast disparity between the two countries in output of key industrial goods. Consider the following 2023 figures:

• Steel production: China 1.02 billion tons vs. U.S. 80 million tons.

• Cement production: China 2.02 billion tons vs. U.S. 90 million tons.

• Electrolytic copper: China 13 million tons vs. U.S. 1.1 million tons.

• Electrolytic aluminum: China 41.6 million tons vs. U.S. 2.1 million tons.

• Coal production: China 4.7 billion tons vs. U.S. 520 million tons.

• Shipbuilding: China 42.32 million tons vs. U.S. 600,000 tons.

• Automobile production: China 30.16 million vs. U.S. 10.61 million.

• Industrial robots: China 430,000 units vs. U.S. 44,000 units.

• Computer production: China 330 million units vs. U.S. 70 million units.

• High-speed rail: China 45,000 km vs. U.S. 2,500 km.

• Highways: China 184,000 km vs. U.S. 106,000 km.

• Rail freight: China 5 billion tons vs. U.S. 2 billion tons.

The list goes on, but the pattern is clear. No wonder China’s the factory of the world—and the U.S. is hooked on imports.

It’s easy to see why…

Over the past 30 years, the U.S. has been steadily deindustrializing—financializing its economy, offshoring its factories, and burning through nearly $13 trillion on endless wars. Meanwhile, China was doing the opposite: quietly and methodically building the industrial base of the future.

Now, we’re seeing the results.

And the next battleground? AI.

The problem is, it’s hard to see how the U.S. can sustain an AI arms race with China. It simply doesn’t generate enough electricity. And I’m not the only one who sees it that way.

Last year, during a conversation on X with Elon Musk—back when they were still getting along—Trump pointed out that the U.S. would need to double its electricity supply to keep up with China in the AI race. Take a listen.

Frankly, I think that might turn out to be a conservative estimate.

Now, to be fair, China has its own vulnerability—energy dependence. It imports over 70% of its oil and a big chunk of its natural gas.

The U.S., on the other hand, has the energy. Oil. Gas. Coal. All of it. But unless it’s put to work—properly—that advantage means nothing.

Enjoy the rest of your weekend,

Lau Vegys

P.S. As I told you in May's issue of Crisis Investing, another area where China dominates is rare earths. Now that Beijing's tightening the screws on exports, the U.S.—and frankly, much of the world—is starting to feel the pinch. Our recent rare earths pick has already doubled since the recommendation went out, clear evidence that smart money is moving early on this looming supply chain disruption. The good news is, our latest rare earths pick—just added last month—is still in the early innings.